This page has been archived and commenting is disabled.
Jeremy Grantham: "We Have Been Conned"
The lessons of Jeremy Grantham's recent interview with Charlie Rose seem to be becoming increasingly prescient as the stock market surges to new highs amid a crumbling macro (and micro) economy. "Bernanke is whipping the economic donkey that can only grow at 1-2% as if it was a race horse growing above 3%," and unfortunately he will keep doing it "until the donkey is dead." As Grantham says, it is a "very dangerous situation to have the most powerful man in the world," doing this as simply put, the Fed, "does not have the tools to generate employment." But while Grantham's clarity on Bernanke's actions are unquestionable in their endgame, his views (below) on Keynes, debt, and wealth transfer are even more concerning. "We had this amazing experiment... but we have been conned into believing by the financial world that debt is everything."
Brief clip on Bernanke's actions...
Full interview here (no embed)...
Grantham On Debt...
JEREMY GRANTHAM: Let me tell you something about debt. In 1982, if you added all the debt up it was 1.25 times the size of the GDP. And then, and it had been fairly flat for a long time, drifting slowly up. And then it kinked 45 degrees and it goes shooting up steadily without too much volatility. Just goes straight up.
CHARLIE ROSE: When was that?
JEREMY GRANTHAM: `82, 1982 -- and it goes steadily upwards to 3.5 times. So we had this amazing –
CHARLIE ROSE: That`s when Ronald Reagan was president, `82.
JEREMY GRANTHAM: Yes, right. And so we had this amazing experiment -- the biggest economy in the world almost tripling its ratio of debt over a block of time that really counts -- 30 years. And what happened in terms of the growth rate of the system, it slowed way down. Now there are other reasons I grant you that. But there`s no room in that equation to believe that increasing debt has anything to do with long-term growth. Is there?
That you triple it, what more can you do, and the growth rate of our system slowed materially? It`s so contrary, isn`t it?
They are the facts. They are so contrary to the general belief. We have been conned into believing by the financial world that debt is everything. Let a bank go, oh my God it would be the end of the world.
CHARLIE ROSE: Would Keynes have agreed with you about debt?
JEREMY GRANTHAM: I don`t know. I really don`t know. It`s such a different world now. The levels of debt are so much higher. He would probably have some ingenuous new theory.
CHARLIE ROSE: OK but I mean most people believe that we do have, I mean they look at the percentage of GDP to debt or debt to GDP.
JEREMY GRANTHAM: I can prove that debt does not generate long-term growth. I have given you the numbers.
CHARLIE ROSE: It does not prevent.
JEREMY GRANTHAM: It doesn`t cause long-term growth it doesn`t create it. Debt, we triple the debt and GDP growth rate went down. There is no evidence that increasing debt increases GDP. And yet that mandate has been given to Bernanke who thinks apparently that it does.
By keeping interest rates low, you`re transferring money away from retirees who spend every penny and are really hurting. And by the way, there`s far more of them every year now than there ever was when economic theories were being panned out. You take money from them, and who are the beneficiaries -- the guys who run the hedge funds and the banking system in general and speculators and corporations theoretically can use it to build. But they`re building less now than practically in history. There is no major league capital spending boom going on.
JEREMY GRANTHAM: We`ve gotten into a bit of a rat hole and we should be careful getting out of it. But it is not the overwhelming thing that will dominate our future. What it does is it distracts us from the real world.
Debt is an accounting world. It`s paper. The real world is the quantity and quality of your people, and the quantity and quality of your capital spending. Are you building new machines? Are you being inventive? Are you training your people? Is your high school system delivering the same education that it used to relative to the South Koreans, relative to the Norwegians? No it`s not. We should worry more about the real world and less about the paper world.
And somehow we`re in this death grip that only paper things matter. And so there is much too little attention spent on education, training, capital spending, finding a way to beef it up. And also I would rather stimulate the economy directly through government spending than I would like to play games with the monetary system and games with the interest rate inflicting great wounds on retirees and so on and transferring wealth to people who won`t spend it
We’re transferring wealth from the poor to the rich by keeping interest rates low. I`m not even sure the economy gains at all by a low-interest rate. And furthermore no one is established convincingly that it is a good idea. It`s a tradition that is a good idea. That`s not the same.
We’ve had lots of traditions like the market would look after itself. People wouldn`t be crooks because economic theory assumes that they`re not. But they often were crooks, and greedy and short-term oriented and willing to dance until the music stopped. Although Soros said the music had actually stopped long before.
(h/t M.O.)
»
- 46977 reads
- Printer-friendly version
- Send to friend
- advertisements -
It seems like cheap Silver is falling out of Ben's choppers right now.
...Into my waiting arms until a 10 oz bar clocked me in the head. Now I let 'em hit the ground first. Still not that many ppl out there picking them up.
I wasn't "conned". I have read the Talmud.
Here is my formula for growth
Growth = Efficient division of labor + Trusted medium of exchange + Freedom to innovate + Freedom to fail + Rule of law - Taxes (necessary for enforcement of basic law of property) - regulation (necessary to prevent monopoly and monopsony) - debt (at times necessary but a drag)
All of these things must be part of the system but we appear to be quite light on the +'s and very heavy on the -'s
So, who says that there must be a growth paradigm? Oh, they told us that we would always grow forever? What do you mean that they lied and that we only really grow under certain circumstances where labor creates value and the whole B/S financialized increase is just smoke, mirrors and, theft and fraud.
Agreed entirely that there does not have to be growth except in a debt based monetary system where P+I does not equal P. We do have a ways to go toward a well functioning somewhat optimized economy. that would from the current cesspool appear as growth. just throwing stuff out there for heuristics.
Here is a link to the interview on bloomberg.
http://mobile.bloomberg.com/video/investment-strategist-jeremy-grantham-...
Bernanke has purchased double d's
http://blog.estrategypartners.com/2013/05/new-phony-fed-stimulous-financ...
Jeremy Grantham lost me at the CO2 is a pollutant and changes atmospheric temperature, global warming loot the masses FRAUD, good lord! Just goes to show that even the most intelligent of us in some areas, can be dumb as a fence post in others.
Its part of their religion
Grantham should not be listened to. From reading other articles by him, he clearly is a eugenicist and sounds exactly like econ profs I had in classes like 'developmental economics' that are all about malthusianism. These elitists want a neo-feudal society.
The problem is not too many people. The problem is that around the world people are not free. They are subject to kleptocracies and rent-seeking tyrannizers whether individuals or mobs as has been happening rapidly in the U.S. a la 'when the majority learns it can vote itself the treasury...' The mind is the greatest asset. But private property rights and respect for liberty is scarce in the world, and even nominally 'free' countries are intruding ever more on inalienable rights. And as Austrian school of econ explains, the mis-allocation of resources that occurs due to signals for supply needs and savings being messed up leads to horrible famines and shortages and other disasters. When this bubble bursts it is not going to be pretty.
Every child is a gift of God. Abortion is murder.
Exactly.
Charlie Rose is part of the controlled demolition of America problem.
He is a cryptome and he is not allied with the long term interests of the American Citizen.
His job is to frame agendas. He works with the Bernak. He is the guy that goes to Bilderberg and never talks about it.
He is on the TV telling your wife and kids that America is aiding al Qaeda in Syria for the good of bombing Iran for Isreal and Jesus.
It's guys like this that are killing this country and concepts like Truth and Light.
Talking to him on TV is like handing the keys to Armageddon to Satan.
Debt! Has been used in two way ... its a ruddy joke.
1. Government - Too cover up the ever increasing efficiency meaning less work hours in the economy so just bung it on the maxed out credit card will you.
2. People - Got a pile of nice goodies here, ipads and the like. Hmmm how can we afford it ? ... I know put it on the maxed credit card will you!
Got to pay down some debt because you are not good for more before you can get any real growth going. What's even worse is you have to get way below the limit before you can borrow anymore and that is going to hurt.
Worst thing in the world is a maxed out punter that you may as well give them it for free because we are building stockpiles of cars, homes, etc. that nobody can afford. Free ipad in a packet of cornflakes soon...
The only thing the govt can do to promote growth is to get the hell out of the economy. Stick to protecting peoples' property and other rights.
If you're not worth a crap at anything, you get a govt job and start governing, regulating, and generally exploiting all those who are good at what they do.
We don't need to go back to the gold standard. We need to get the govt completely out of the business of dictating to us what we choose to use as money altogether. What do we need a central bank for? All they do is rob us blind while claiming that they are "stimulating" the economy.
Right now they are destroying a generation of savers to prop up the stock market, which will crash as soon as they stop doing so.
Maybe sooner.
Stick to protecting peoples' property and other rights.
________________________
Yeah, 'america' is an unarguable example that 'americans' have achieved growth by protecting people's property and other rights.
Trouble is that people in power, including when they are 'american', must deal in reality.
It is impossible for an 'american' in power to draw the conclusion that the 'american' way of achieving growth is by enforcing property and other rights.
'Americanism' will keep going as it was designed.
And 'americans' who are insecure in their entitlements will keep taking shelter in a fabled past.
I hate Americans!
Every American citizen, without exception, is pure evil and must be wiped from the face of the earth.
(But everyone in MY society is as pure as the driven snow, and consumes zero resources, and emits zero pollution.)
Signed: AnAnonymous
AnAnonymous ridiculously conjectured:
Made me laugh. Who do you think you are going to fool with that story?
Better to assess the situation under the current possibility rather than relying on a hypothetical.
Of course, this little fact forces a reality check that destroys totally the story.
Side tracking, side tracking...
Only 'americans' in power have to deal in reality.
Unable to address the point, AnAnonymous engages in:
'AnAnonymist' Chinese citizenism citizens do what they must to avoid acknowledging their propaganda is a cheap Dung Swing Ball.
Your disengruntled absurditations are failurous.
The weaknesses in the democratic system today ensures that life is going to be very tough financially for the majority of the population worldwide.
Illusion of Democracy today.
People sponsored by the rich, make false promises to the masses to get elected. Distribute national wealth amongst themselves and their sponsors (Industrialists) and when that is not enough borrow money from rest of the world and continue the distribution process. The borrowed money has to be paid back by taxing the masses keeping in mind that tax rules are made such that the politicians and their sponsors pay minimum or no taxes.
End of political tenure, rinse and repeat till the whole system breaks down and the world wealth is cornered by a miniscule of the population.
http://www.marketoracle.co.uk/Article35345.html
www.letstalkmoney2012.in
I just checked the PE ratios of Cramer's "top six" (per the net) recommendations. They are WAY above Grantham's nosebleed bubble level yet Cramerica is still raking in the Bernanke bucks.
[can a ZH'er help out and point me to the present index weighted composition of the S&P 500?]
The donkey he is flogging is " We, the people"
It's time "the people" flogged him back and put him behind bars ( at the least).
Otherwise " we, the people " will be beyond salvage.
Ben works for his master, We The People, aka the 'american' middle class.
Ben is a green 'american' monster that smells bad.
'Americans' are thieves at heart.
They have been growing their societies through theft.
But now the globalization is nearing its end.
'Americans' are looking around and see very few people left to thieve from.
So as usual in this situation, there is one theft target of choice: the category of people who has grown much fatter during the theft spree because they were protected from it. They were transfered the loot while being immune to theft themselves as they were the thefts.
Today, that category of people is the 'american' middle class, that has benefited so much from the 'american' expansionary theft.
They are left with much, much to thieve from.
Some of them will be looted to ensure that the rest live their entitlement dreams.
The way 'americanism' works.
Begin the final anti-American jihad!
Death to all "americans"!
All 'americans' are evil! Murder every one!
Signed: AnAnonymous
'Americans' are such thieves at heart.
They even thieve handles to make their fantasy.
Hey, 'americanism' is as 'american' does and the 'american' nature is eternal.
And some of them will always feel the urge to illustrate any mention of their nature.
Here: 'americans' are thieves at heart, illustrated by thieving a handle.
I hate Americans!
Americans are all Satan incarnate!
Die, die, die, all you Americans!
Kill Americans! KILL KILL KILL AMERICANS!!!!!!!!!
Signed: AnAnonymous
The relationship of 'americans' to religion is always funny to watch.
More AnAnonymist cheap imaginated rhetorics.
You should read the Bible (NT, not OT) before vomiting your diarrhea.
death to the northeast you mean. where all atrocites are committed- cleveland- where obama vacations 25 days a month and his bankers rob. the gun slaughters, kidnappings are not in buck wild but in your suburban slave factories and a northerner say "we should let the south go"? why dont you miserable lying murdering assholes go. leave the rest of the world be and commit suicide.
Jeremy,
are you trying to sell more subscriptions to your service?
Best comment.
Why not after all? He is an 'american'. And delivering what people wish when they wish it is the 'american' way of doing business.
And at the moment, many 'americans' wish they could get kinds of fantasy this 'american' provides.
Save the ad hominems, do you have something else to offer, something that could save your pitiful attempt at propaganda?
Of course he's right that it's better to spend money insulating the Northeast than giving money to banksters. So what? It's also probably better to give money to the welfare queen down the hall rather than the junkie sleeping under a bush. The point is that WE SHOULDN'T BE GIVING EITHER OF THEM MONEY!
Silver For The People
Net energy is in decline and it cannot be arrested by known other energy sources. All new energy sources have a lower rate of energy return than conventional oil.
Net energy decline is always followed by a decline in complexity, the number of social roles will shrink, the portion of the population working in non-essential roles (food, shelter, energy) is in a long term decline.
Only a new energy source or a new economic paradigm can change this, and these are not on the horizon.
The other aspect of this is that exponential growth is impossible on a finite resource base. The decline is starting right at the time what the Club of Rome predicted in the seventies.
What is this "we" white man?
Love the way these slightly aware investors like Grantham and Gross try to scrub their images after a lifetime of profiting from a corrupt system.
Sorry guys, too little, too late.
You can check the balance of your EBT card with your iPhone.
Can't beat that for progess and innovation.
Bernanke is the reverse Robin Hood. Crushing the common man for the benefit of the Elite.
Grantham: By keeping interest rates low, you`re transferring money away from retirees who spend every penny and are really hurting. And by the way, there`s far more of them every year now than there ever was when economic theories were being panned out. You take money from them, and who are the beneficiaries -- the guys who run the hedge funds and the banking system in general and speculators and corporations theoretically can use it to build. But they`re building less now than practically in history. There is no major league capital spending boom going on.
Charles Rose: yet another voice of sanity to join the growing list of those who've spoken out against the madness that's taken over the central banks and political elites.
Another reminder: Jim Willie says that Bernanke should be stripped of his PhD. I agree, because he clearly hasn't got a clue about real economics and will leave a trail of destruction behind him.
Rose is a shill.
Jim Willie is right.
ZH is definitely a little misleading on the quptes they picked...I think everyone would be well severved to watch the whole video...
his discvussion about debt and how you deal with it is interesting, and not really fully detialed in the Quotes ZH picked out
Question Authority...even Question Tyler Durden
Question Authority...even Question Tyler.
Please watch whole video...his opinion about debt, around the 50:00 mins mark, is very level-headed and not full of
dire predictions...ZH seemed to omit his important qualifiers in its posting.
Everyone has an agenda
"We had this amazing experiment... but we have been conned into believing by the financial world that debt is everything."
Just a small disagreement, the people have been taught that money is everything. The real con is that people believe that money is wealth and that therefore wealth can be created out of thin air. Bennie is a modern day alchemist, but we more accurately understand him to be a coin clipper.
Next time you are with a group of people ask how money is created, they will say hard work, profit, etc. They misunderstand the difference between money and wealth, to all of our detriment. The one thing you could teach your kids that would stay with them for the rest of their lives is the definition of money and the difference between money and wealth.
This is the great con job, and those guys at the Fed are experts at the con.
It is Satanical for sure, history shows what happens when the "people" figure out the con. Suggest you don't be one of those "groups" that are blamed for the mess when the ponzi is discovered.
sschu